Corporate compliance programs: risk management for the future

The Department of Justice has estimated that the government loses $100 billion annually in health care fraud. Consequently, the government's health care fraud enforcement activities with respect to all health care providers and suppliers continue to grow. Last year alone, the government collected more than $8 billion in settlements, fines, and penalties involving health care fraud. Recent settlements with the government have begun to include corporate compliance programs that require continued government oversight of the health care organization as an essential part of the settlement. The first section of this article describes the legal significance of health care companies' having corporate compliance programs. The second section provides a sample list of topics that should be included in any corporate compliance program. Finally, we describe various issues related to the creation and implementation of corporate compliance programs.     

“Good” corporate governance and the quality of internal auditing departments in Italian listed firms. An exploratory investigation in Italian listed firms

One of the most important issue relating to corporate governance reports refers to their ability to provide users with a complete set of information regarding the effective ability of an entity to achieve oversight objectives by the compliance to corporate governance practices required by a specific law or industry code. In addition, other features, such as the quality of the internal auditing function or the sensitivity of top management to issues relating to corporate internal controls and risk management, can also be taken into account when formulating a judgment on the quality of corporate governance practices. Is there an association between the compliance to codes and internal controls effectiveness? We propose to assess the quality of corporate governance through a proxy that considers several characteristics of internal audit departments and combines them to determine an Internal Audit Departments global quality index—IAD Index. To define IAD global quality we consider the effectiveness of an internal audit function analysing its operational aspects. The IAD Index is based on several signalling elements that previous literature assumed as proxies for quality of IADs which are grouped into four pillars: a formal quality index; a static quality index; an activity-related quality index; and a performance-linked quality index. We then test the IAD index on a sample of Italian listed firms and conclude that there are significant associations (positive and negative) between the degree of compliance to some corporate governance regulations for listed firms and the IAD Index for the sample being considered.     

Compliance and ethics programs: competitive advantage through the law

This paper aims to address whether deploying compliance and ethics programs will assist US organizations in implementing the internal mechanisms necessary to achieve a competitive advantage from the law. My focus will be on the US legal system, as the corporate compliance and ethics programs examined are based on mitigation provisions contained in the US Federal Sentencing Guidelines. In particular, I propose that organizations can attain a sustainable competitive advantage from the law by considering the following questions: Do compliance and ethics programs assist organizations in achieving a better understanding of the law? Are compliance and ethics programs a cost-effective approach for coping with an organization’s legal issues? Can compliance and ethics programs aid organizations by preventing these legal issues from occurring in the future? Will compliance and ethics programs support organizations in reframing legal issues as business opportunities?     

Conjoint effects of interacting strategy-making processes and lines of defense practices in strategic Risk Management: An empirical study

The ability to contain adverse effects of major risks under turbulent conditions and exploit the opportunities they present are fundamental concerns in strategic management and various institutions promote enterprise risk management (ERM) to deal with these challenges. Yet, our knowledge about how ERM affects performance and interacts with corporate strategy-making processes is limited. The ERM frameworks impose first and second lines of defense practices to integrate business operations and corporate risk oversight. Emergent strategies generate responsive initiatives and strategic planning coordinates updated actions. Hence, this study analyzes the conjoint effects of these ERM practices and strategy-making processes based on a large corporate sample and finds that ERM practices depend on strategy-making to attain effective risk outcomes. The application of ERM frameworks can, therefore, not be assessed in isolation, but must consider corporate strategy-making. This has implications for the way we conduct research on strategic risk management, how executives approach risk oversight and policy-makers impose formal risk governance requirements.     

The Role of NGOs in Ameliorating Sweatshop‐like Conditions in the Global Supply Chain: The Case of Fair Labor Association (FLA), and Social Accountability International (SAI)

Over the last 20+ years, globalization has made international trade and investment more efficient and productive. In the absence of coordinated global regulatory regimes, it has also made multinational corporations (MNCs) impervious to social concerns in the countries where they operate. There is considerable debate in the academic, political, and business arena as to the causes of the apparently inequitable distribution of benefits between labor and capital. Notwithstanding, the relative merits of this debate, and facing tremendous societal pressure, companies have adopted voluntary codes of conduct to ensure that workers making products for them in poor and developing countries are protected from hazardous working conditions and receive wages that meet local laws and market conditions. These codes, however, suffer from a lack of credibility and proof of substantive compliance. A new type of nongovernmental organization (NGO) has emerged that monitors a company's compliance with prespecified standards and provides assurance to the external stakeholders that the company has fulfilled its voluntary obligations. From an historical perspective, this has been an innovative phenomenon where the monitoring organization purports to act as an honest broker to ensure all concerned that the company/industry has fulfilled its obligations. In this article, we undertake a thorough examination of two such organizations, that is, Fair Labor Association, and Social Accountability International, that have played a pioneering role in bridging the gap between societal expectations and corporate performance. We examine their governance structures, operating procedures, monitoring standards, and public disclosure of findings, and above all, their success in improving the level of corporate compliance with their self‐created codes or standards. Unfortunately, our findings and conclusions are disappointing. In our view, the two groups have mostly failed to meet their avowed goals. Rather than using their NGO status to help companies improve their code compliance, they have suffered from managerial capture and have been reduced to corporate apologists.     

Physician career development: toward building a model

Virtually no managed care organization provides a comprehensive and integrated program for physician career development. That's the principal finding of a survey we carried out in Spring 1994 in which we interviewed several individuals who have proven instrumental in the creation of career development programs at their managed care organizations. We started our research with the hypothesis that career development programs for physicians--frequently the most highly paid category of employees and the ones often most directly involved in the delivery of health care--should parallel the mission of the organization. In many of the organizations we surveyed, the mission included clinical excellence, managerial competence, research, teaching, community service, and building shareholder equity. While each organization offered some component of career development--usually clinical improvement and management development--very few offered programs that fostered the continued professional development of physicians in other aspects of their missions. In most cases, even in organizations with stronger career development agendas, the programs were passive and were rarely linked to the overall "corporate" goal of the managed care institution. This critical disconnect makes it extremely difficult for health care organizations to develop a workable system of accountability for their career development programs.     

Democratic Implications of Public Organizations

The author suggests a Weberian methodology, based on theories of democracy and organization, for assessing normative implications of public organizations. How different organizational models contribute to (re)create democracy and legitimacy is scrutinized with reference to a Swedish IT program. The conclusion is that a system management organization will be an appropriate choice for dealing with tame problems, but it will at the same time promote an elitist democratization. In contrast, a development organization will be more appropriate in dealing with complex problems, and it will most likely promote discursive democratization.     

The Cadbury Committee recommendations on corporate governance – a review of compliance and performance impacts

In December 1992, the Cadbury Committee published their Code of Best Practice. The recommendations, which largely reflected perceived best practice at the time, included separating the roles of CEO and chairman, having a minimum of three non-executive directors on the board and the formulation of audit committees. The Code also advocated that a more active role be taken by institutional investors in the promotion of good practice in corporate governance. This paper discusses how agency problems may be (partially) resolved by corporate governance, reviews the evidence on compliance with the Cadbury Code and examines the relationship between board structure and firm performance, looking for evidence that the Code has enhanced board performance. While there is no empirical evidence of an association between board structure and firm value, there is some evidence that compliance with the Cadbury recommendations enhances board oversight with respect to the manipulation of accounting numbers and the discipline of the top executive.     

The influence of organizational identification on organizational knowledge management (KM)

Information technology (IT) outsourcing vendor organizations contain isolated business units whose creation and sustenance greatly facilitate business operations. But they also introduce important challenges for organizational knowledge management (KM). In this paper, based on 7 months of intensive field-work at India Inc., a leading Indian IT firm, we looked at how members’ identification with two organizations, their own and their client organization, influences their compliance with an organizational KM initiative. The findings show that members have difficulties in complying with the expectations of the organizational KM initiative owing to a stronger identification with their client organizations. At the same time, they comply readily with KM initiatives at the business unit level. The findings show that KM managers at India Inc. use the help of middle level managers in the business units in their efforts to improve members’ compliance with organizational KM. Theoretical and managerial implications of the study are discussed.     

Knowledge Building: Developing Employees Through Education

Is it enough for an organization to develop the total individual? Beyond technical expertise and skills necessary to perform jobs, employees who are encouraged to learn are more willing and able to meet the needs, goals, and objectives of the organization. These employees who are will-rounded transition what they have learned into the workings of the organization and for the sake of the growth and development of the organization. Allowing employees to learn, organizations create a workforce capable of applying all the benefits of learning to the growth of the organization. Whether a corporation develops its own university, creates an alliance with traditional educational institutions or creates a virtual university, it gives the employees the opportunity to learn and develop. As Peter Drucker said in a 1994 interview, the growth industry of the future is the education of adults. The education and the development of executives and the workforce are a new commodity and organizations that support education will be placed at a distinct competitive advantage over organizations that do not. Imagine a workplace filled with employees who have realized self-satisfaction, employees who can of gather information, analyze information and make decisions. Imagine a learning organization consisting of employees with greater understanding of corporate politics, employees who are motivated and employees who are persistent in pursuing goals. Is it worth the expense to increase employees' knowledge through education? Is it worth the expense to develop employees to increase productivity and obtain financial goals for the shareholders and stakeholders? I think any organization not willing to invest in an employees' education is an organization that is `running a fever' and an organization that may have difficulties competing globally in the next millennium.     

Risk Communication in The Netherlands: The Monitored Introduction of the EC "Post-Seveso" Directive

Implementation of article 8.1 of the EC-"Seveso" Directive (82/501/EC) is now under way in many countries in Europe. In The Netherlands, the implementation of the Directive started with a carefully monitored introduction of active information provision at two sites (Dordrecht and Elst). This introduction was supported by a multidisciplinary research group. This group helped to develop the risk communication program and also played a role in the evaluation of the program. This paper describes these processes and their evaluation. We will focus on the design of the risk communication programs and the effects of the programs on knowledge and attitudes of the local target groups. This effort and its results clearly started an institutional learning process involving governmental bodies at several organizational levels (local, regional, and national), and industrial organizations (individual firms and organizations of industries). Monitoring the design, the implementation, and the effects of active information provision proves an effective means to gain experience with the implementation of the Seveso Directive and could help to facilitate further implementation.     

Employee Involvement in Support of Corporate Values in Successful Organizations: Groups, Cooperative Interaction, and Influence

Employee involvement can supplement strong corporate cultures to develop innovative organizations. Executives from forty successful companies responded to interviews on the organization's values and involvement practices. Structural equation analysis indicate that effective involvement – measured by the use of employee problem solving groups, cooperative interaction, and employee influence – was a critical mediating mechanism between people-oriented values and firm performance. These results suggest the complex challenge of developing a successful organization and guides for making an organization both value-driven and productive.     

Interaction and effectiveness of corporate e-learning programmes

This study was conducted in a large Mexican organization running a virtual corporate university. It aimed to evaluate students' perceptions of three types of interaction (learner–teacher, learner–content and learner–learner) and their views on the effectiveness of online courses in terms of satisfaction, learning and behaviours. Twenty-six employees who had studied at least one online course within the organization answered an online survey. Four of them were interviewed. Results show that: (1) Learners value their interaction with the content the most. (2) Online learning is generally perceived as an effective method for delivering corporate training. (3) There is no perceived relationship between online interactions and training effectiveness. The findings are limited to the specific context of the participating organization. Further research into online learning in corporate settings is needed to understand training interactions and changes in job performance.     

Flexibility, Hierarchy, Markets

The conclusion that organizations need to become more strategically flexible as a response to increasing environmental dynamism and uncertainty has been an important feature of recent contingency theories of organization design. In this literature organizations have been analysed from the perspective of the development of networks of organizations concentrating on their core competencies and contracting among themselves on a stable long-term basis. This model of inter-firm relationships provides an alternative mode of organizational structuring to that arising from vertical integration, which, by contrast, is seen as fostering strategic inflexibility. In the literature on corporate restructuring and changes in ownership form arising from the markets and hierarchies perspective, we see a similar emphasis on the dysfunctional consequences of large-scale bureaucratic organization. Changes in ownership form are seen as a major means of providing more effective managerial control. In this paper we argue that linking the literature on flexibility emanating from contingency theories of organizational design and the markets and hierarchies perspective provides important new insights into current and emerging forms of organization.     

How to ensure that headquarters add value

Over the last few years many international corporations have started to restructure their organizations fundamentally by redistributing management tasks and creating small, market-oriented units. However strong the centrifugal forces were, the core task in restructuring these corporations was: how to redesign the corporate centre. The design of the corporate centre is of major importance for the performance of corporations. Corporate Centres can actively improve the performance of their business units, for instance by defining performance targets or by providing shared resources. On the other hand headquarters are frequently accused of being bureaucratic liabilities which make no contribution to corporate success. This problem has grown in recent years as organic growth, internationalization, and an increasing number of mergers and acquisitions have generated new co-ordination problems. These developments have given new priority to the question of corporate centre organization. What is required is the definition of an effective role for the centre and the establishment of central units with efficient scope and size. This article discusses both tasks in the light of current and future requirements for corporate centre organization.     

HCFA issues final Stark I rules

While final rules clarify many "gray" areas of statutory interpretation under Stark I, some questions of interpretation under this law will remain largely unanswered until further Stark II regulations are issued. Thus, the health care industry is without definitive guidance on many issues. It must continue to make "best guesses" in interpreting the intent of the statute. However, bad guesses could mean imposition of severe penalties, including recoupment and substantial civil money penalties for making prohibited referrals. Moreover, the regulations confirm the Department of Health and Human Services' position that no advisory opinions are available. Because the final regulations were not issued until after the effective dates of the Stark Law, yet another round of restructuring may be required to effect regulatory compliance and avoid imposition of penalties. "Health Law" is a regular feature of Physician Executive from the Washington, D.C., law firm Epstein Becker & Green. Mark Lutes of that law firm serves as editor of the column.     

Instilling a mediation-based conflict resolution culture

Conflict thrives and grows in the increasingly competitive and uncertain health care environment. Conflict impacts health care organizations' performance in several areas: (1) patient grievances and health plan member disputes; (2) internal employee and management disputes; and (3) payer, provider, and vendor disputes. "Grief Budgets," the hard costs and soft costs due to disputes that are poorly handled and conflicts that are ignored, detract from an organizations health mission and erode its bottom line. This article offers a strategy to solve conflict at an early stage in all three areas, with measurable results that strengthen profits and improve customer service by instilling a mediation-based conflict resolution culture throughout the organization. Mediation is non-adversarial, neutral, proactive, and collaborative. It is also confidential and always protects the future relationship between the parties. The challenge, therefore, is to strategically implant mediation into the health care organization's structure, to intercept and solve conflict early on. The article provides an overview of the steps needed to install a dispute resolution program.     

New Public Management and Principals’ Roles in Organizational Governance: What Can a Corporate Issue Tell us About Public Sector Management?

The article analyzes debates between institutional investors and corporate management as a way of investigating accountability issues in organizations with dispersed principals. By exploring issues at stake in entrepreneurial management in any organization with multiple owner/principals, the narrative adds to the critique of public-sector entrepreneurial management from an unusual vantage point.     

Corporate Ideology – Meanings and Contradictions for Middle Managers

This paper describes an investigation into corporate ideology and control and the responses of the ‘middle managers’ in a large engineering corporation. The paper explores the creation of meaning and values in the organization through a large‐scale ‘corporate values’ programme aimed at 1500 middle managers, and asks to what extent the priorities of these managers match those of the organization, and whether the creation of meaning through an ideological values programme carries risks that have not been considered by the organization adopting this approach. The findings suggest six individual response types amongst the delegates on the programme: ‘evangelists’, ‘actors’, ‘sceptics’, ‘open cynics’, ‘critical thinkers’ and ‘untouched professionals’. The influences upon these responses are considered, and a number of key factors identified as important in affecting perceptions of and response to the programme. The paper concludes that today more than ever, corporate ideologies are becoming an increasingly dominant influence on our organizations, causing mixed and confused responses amongst the middle managers who are required to disseminate these messages.     

11 The Effects of Governments on Management and Organization

Abstract

We review and integrate existing research from organization theory, strategy, organizational behavior, economics, sociology and political science on the effects of governments on organization and management, with a focus on how governing ideology and government capability influence independent organizations’ forms, strategies, and their participants’ behavior. When brought together these works suggest significant research opportunities in the fields of management and organization, as well as new perspectives on public policy challenges. Several avenues of potentially profitable empirical research include more attention to the influence of government on corporate strategies, more research on the strategies of pursuing corruption and government capture for competitive advantage, the role of government in fostering innovation and the growth of entrepreneurial organizations, and extra‐organizational contextual effects on managerial and employee organizational behavior. Possible public policy implications are illustrated with an application to the role of organizations in national wealth generation and dispersion.